In the high-tech industry, relative competitive positions of companies can change radically in a downturn. A McKinsey study found that 69 of the 146 high-tech companies entering the 2000–2002 downturn as leaders—47 percent—emerged from it as laggards and 13 percent improved their positions during that same period. I am sure a bunch of new companies made the list for the first time.
So what could explain this movement on the leader board? After all the incumbents should have a sizable market share, stronger balance sheet, arguably better capabilities and reputation which should make it difficult for any challenger. The answer in my opinion is the ability and conviction of the challenger to change status quo, develop and bring about disruptive ideas in the marketplace while the incumbent tries to protect status-quo.
In order to bring home my point on using disruptive ideas to gain market share, I was looking for examples in the current downturn where companies have attempted a similar approach. I picked Google as an example since I could find a lot more public data to support my case. In the last 18 months Google has made inroads in areas where they do not have a strong presence traditionally by forcing a disruption. Let’s look at this in a little more detail to understand some of the strategies and how they play out.
- Chrome OS for Netbooks – Moving all of desktop computing to the internet is Google’s strategy and Chrome OS is a step in that direction. Google initially introduced the Chrome browser which is a lite version of Chrome OS for market testing and is now planning to roll out Chrome OS in low cost Netbooks and similar devices. Existing operating systems such as Windows support a far wider variety of applications and provide more services than Chrome OS, but Chrome will probably be good enough for Netbooks. As Netbooks or similar devices expand their reach, Google should be positioned well to capture market share.
- Google Maps – Maps was one of the first product extensions on Google search and the company has always sought a leadership position in GPS enabled search and related services. Till recently, product extension for Google’s offerings in this space was dependent on Tele Atlas and Navteq, which had dominant market position in supplying map related data. When Google released in new version of Android OS in late 2009, it announced that it would be using its own map data delivering a crushing blow to the domination of Tele Atlas and Navteq (who were charging other mobile OS companies a huge fee for similar functionality), essentially becoming a map data provider itself. Riding on Android OS, which is expected to gain about 15% market share by 2012, Google will expect its market share increase as a map data provider.
- Nexus One – At the beginning of this year, Google released the Nexus One phone which is carrier independent and runs their latest Android 2.1 open platform based mobile product. This might not be an iPhone killer, but it sure does provide an alternative for customers against existing products and Google might end up stealing market share if and when open platform based mobile platforms gain acceptance.
One should note that Google hasn’t been successful yet in these attempts to be disruptive. But I hope these examples provide you with an insight into what a disruptive idea might look like in today’s environment. Though the example is focused on Google, I am sure you understand that the central theme of using disruptive ideas to gain market share is relevant in other areas within the technology industry as well as in other industries.
In summary, surviving a downturn and protecting market share is not easy. Growing and gaining market share is even more difficult in a recession. To that effect, it is important for executives to think outside the box to change status quo and follow through on execution through strong leadership.
I hope you enjoyed this post and please do send me your comments. For those interested in the concept of disruptive innovations, I recommend reading Clay Christiansen’s The Innovator’s Dilemma.